EDITORIAL: Petaluma should be wary of tax measure

Some Petaluma City Council members clearly had reservations Monday as they discussed the possibility of putting a sales tax increase before voters this fall. As well they should.

It doesn't take much -- beyond the initial $15,000 to $30,000 to cover the election costs -- to ask local residents for more money. The big question is can you sell it?

To do so, a city or county needs a clear message -- why the funds are needed, what the money would be used for and, most important, how the city has managed the revenue it has had up to now.

Petaluma has a good story to tell about its financial challenges, but it needs to work on its central message if it hopes to have any chance of success with something as ambitious as a half-cent sales tax increase.

There's no question that the city could use the additional funding. Due to dramatic drops in property tax and sales tax revenue, Petaluma has been forced to cut its general fund from $48 million in 2008 to $32.5 million this year, a decline of more than 32 percent. With that, the city has eliminated one-fifth of its workforce.

General fund reserves have been nearly exhausted -- down to a mere $5,000 at one point in 2010 -- while funding for capital projects as well as maintenance and upkeep have been put on hold. As City Manager John Brown noted in his report to the council on Monday, all of this "has created a large pool of unmet needs" for the city.

Petaluma, which along with Cloverdale and Windsor has the lowest sales tax in the county at 8 percent, projects that a half-cent increase would add $5 million to its coffers. That, Brown says, would allow the city to replenish its reserves -- up to roughly $5 million or 15 percent of the general fund -- catch up on street repair and maintenance and replace aging city vehicles.

The City Council is clearly encouraged by the success of local sales tax measures, including Measure J in Sonoma, in the June 5 election. Ten out of 11 sales tax measures across California were successful, and all were for a half-cent increase.

But not all cities have the same story to tell. Unlike many communities and Sonoma County itself, Sonoma, for example, never joined the list of California communities that retroactively increased pension benefits to its employees, creating what is now a massive problem with unfunded liabilities.

To deal with its retirement problem, Petaluma took a step in the right direction by tentatively approving a new contract for police that sets up a second tier for new hires, meaning they will receive substantially less generous benefits going forward. This is likely to serve as a model for contracts with other public employee unions.

But will voters consider that sufficient? The net savings from a two-tier system is years from materializing, and the city still faces an unfunded liability of around $37 million.

Meanwhile, conventional wisdom would suggest the city should hold off on going for a tax given that voters in November already will be facing one or more statewide tax measures and at least one local measure -- a $52 annual parcel tax for parks and recreation facilities in Petaluma. At some point, city officials run the risk of voters saying no to everything.

The council would be wise to follow Brown's advice in making sure the tax is temporary and will be used essentially for one-time expenses -- not on projects that require increased staffing. Even then, the city needs to work on its message and make ensure voters are in the mood to listen.